Private equity enters a new cycle

Nothing is the way it was. And that is right. After its greatest boom phase to date, the private equity industry is now experiencing the greatest consolidation in its history. The gigantic funds, the reckless financing, the publicly fought battles over supposedly attractive takeover targets - all that is a thing of the past. The survivors of the catastrophes of 2007 and 2008 - some of which were their own fault - need to be sober and detached, far-sighted, experienced and astute. At the same time, the industry is at the beginning of a new cycle: private equity is coming of age. It is already clear today that equity participation has joined the capital market and bank loans as the third pillar of corporate financing. The shock of 2009 has faded, but to speak of a new boom would be an exaggeration. In a market that is slowly picking up again, the industry is just repositioning itself. - The investment industry will emerge from the crisis stronger - but with fewer players.

Review

What actually happened? In the 1970s and the first half of the 1980s - a phase that can be described as the "stone age" of private equity - the industry was very manageable, kept a modest profile and was of no great significance to the financial world. There were a handful of small, partner-owned investment companies that made their investments - often minority investments in rather small companies - with very moderate loans.

From the mid-1980s, the picture changed. The investor base grew, and new constructions were added. Public to private, i.e. the de-listing and restructuring of companies was a lucrative business, especially if the financing could be represented by junk bonds. Private equity in the second half of the 1980s, dubbed the "Bronze Age" in retrospect, was still a grind: acquiring companies, leveraging them, changing them and selling them again after four to five years. At this stage, many imagine as actors such characters as the film character Gordon Gekko in "Wall Street", who used ruthless methods to make an incredible amount of money from their holdings in an incredibly short time.